Alvarenga v. Scope Industries, et. al., WCAB #ADJ8733556 involves a settled workers’ compensation case for which a petition was filed to set-aside a Compromise & Release (C&R) because of mutual mistake. The purported mistake was that the Medicare Set Aside (MSA), prepared by the Employer’s vendor, Helios, required review and approval by the Centers for Medicare & Medicaid Services (CMS). The Worker’s Compensation Appeals Board (WCAB) rejected that argument that there was any requirement by CMS to review and approve MSAs, but found on other grounds good cause to set aside the C&R.

On March 17, 2016 Applicant and Defendant Employer entered into a C&R that was approved by the Workers’ Compensation Judge (WCJ). Typically, stipulations included in the C&R are binding between the parties unless there is good cause to set aside or have them reconsidered. In this matter, the Applicant, a Medicare beneficiary agreed to a lump sum settlement of $39,000 that included an award of $11,040 for permanent disability and $5,850 for attorneys’ fees and costs. The net amount left to the Applicant therefore was $22,110. The Defendant Employer filed a petition to set aside the C&R because of mutual mistake.

The Helios MSA determined that $24,079.23 was necessary to be set aside form a settlement to adequately protect Medicare’s interest. According to the Workers’ Compensation Judge Helios told the Defendant Employer that CMS review and approval was not necessary because the MSA was below the CMS threshold for review. Regrettably, this was wrong, as the total value of the settlement determines whether a case meets CMS review guidelines. The Defendant Employer learned of this error after the C&R was approved by the WCJ and therefore filed its petition to have it set-aside so the parties could start over. The Applicant never responded to the petition.

The Workers’ Compensation Appeals Board (WCAB) did not find mutual mistake to set aside the C&R based on Defendant Employer’s assertion. CMS does not require review and submission of MSAs. There is a voluntary process, but only for those matters that meet certain criteria. This case because of the $39,000 proposed settlement would meet the threshold for CMS review. However, on its own, the WCAB did find good cause to set-aside the C&R for two reasons. First, the net settlement was inadequate to fund the MSA value set forth by Helios by $1,969.23. Second, the Applicant was not properly informed of the consequences to him personally, when CMS is not asked to approve the MSA.

Franco Signor Commentary: Because of the inability to predict MSA values, the Industry is moving toward MSA products that do not need CMS approval and submission. The review and approval process is voluntary, and parties must give up their valuable appeal rights. The non-submit MSA would preserve appeal rights, but must also provide value to protect against CMS claims challenging the non-submit value. Our Evidence Based Medicare Set Aside (EBMSA) uses guidelines such as ODG and ACOEM to reasonably assess the most probable future treatment. We document these decisions and stand by them should CMS disagree. Our attorneys stand ready to handle or file any necessary appeals, which is included within the price of our product. In the right situations we indemnify and have the insurance program to back it up.